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Proactive fiscal policy will support high-quality development

Since the beginning of the 13th Five-Year Plan period, China has focused on supply-side structural reform, more effectively implemented a proactive fiscal policy, played a bigger role in expanding domestic demand and making structural adjustment, and worked hard to support the three major battles to ensure and improve people's livelihood, thus effectively promoting sustained and sound economic and social development.


In order to support the development of the real economy, the financial sector has insisted on reducing government revenue in exchange for adding business efficiency and multiplying market vitality. In the past five years, a series of tax cuts have been implemented, focusing on reducing the tax burden on manufacturing and small and micro businesses. We will fully implement the policy of replacing business tax with value-added tax, deepen VAT reform, streamline tax rates, reduce VAT rates, and implement the policy of retention, credit, and rebate. The value-added tax and enterprise income tax policies that support small and micro businesses have been expanded, and the preferential tax policies that support r&d and innovation have been improved. We will raise the basic individual income tax deduction standard and implement special additional deductions to reduce the tax burden on the working class. We will lower the overall tariff level and support greater opening-up. We will increase efforts to reduce fees across the board, and continue to review and standardize fees charged by enterprises.


Since the 13th Five-Year Plan period (2016-2020), proactive fiscal policies have adhered to the main line of supply-side structural reform and made great efforts to consolidate, strengthen, upgrade and expedite the reform. We will implement preferential tax policies for enterprise restructuring and restructuring, and cut overcapacity and make structural adjustments, and encourage enterprises to let go of the bad. We will increase the vitality of micro subjects, continue to increase investment in basic research, strengthen support for public scientific and technological activities, arouse the enthusiasm of researchers, and solve the problem of insufficient capacity for original innovation. We will improve the industrial chain, promote high-quality development of the manufacturing sector, give full play to the role of government funds, and guide capital and resources to focus on key strategic areas.


We will unblock the circulation of the national economy, and encourage financial institutions to increase support for private enterprises and small and medium-sized enterprises through the comprehensive use of tax incentives. We will make good use of special funds for the development of inclusive finance to support small and micro businesses and those involved in agriculture, rural areas and farmers in finding it difficult and expensive to obtain financing.


We will maintain the scale of necessary government spending to support the expansion of domestic demand. From 2016 to 2019, the national fiscal deficit has increased from 2.18 trillion yuan to 2.76 trillion yuan, and this year it has further increased to 3.76 trillion yuan in response to the impact of coVID-19. By coordinating government revenue, deficit and using the budget stabilization fund, government expenditure increased from 14 trillion yuan in 2013 to 23.9 trillion yuan in 2019, with an average annual growth rate of 9.6%.


In order to make the most of the limited funds available, the government departments have optimized the structure of expenditures, strengthened their ability to support the overall economic and social development of the country, and worked to promote consumption, stabilize investment, and unleash the potential of domestic demand. We will continue to increase the scale of central infrastructure investment, optimize the direction and structure of investment, and focus support on low-income housing projects and major infrastructure projects. To support steady local investment and strengthen weak links, special bonds of local governments have been issued to leverage investment.


We will strengthen policy support and financial support and resolutely win the three major battle s. We will make precise and resolute attacks on prominent issues and concentrate our efforts on key campaigns. We will continue to dredge and strengthen local government debt management. We will resolutely curb the increase of hidden debts and actively yet prudently defuse the stock of hidden debts. By the end of 2019, the outstanding debt of local governments had reached 21.31 trillion yuan, and the debt ratio of local governments was 82.9 percent, lower than the international warning line of 100 percent to 120 percent. The risks were generally under control.


We will adhere to the current poverty line, improve funding and policy systems, and do our best to support and win the battle against poverty. We will continue to increase the size of special government funds for poverty alleviation, mainly to support impoverished areas in speeding up economic and social development and improving the basic working and living conditions of those who are in poverty.


Since the beginning of the 13th Five-Year Plan period, despite considerable pressure on the government to balance revenues and expenditures, we have ensured that investment in basic livelihood has only increased and not decreased. At the same time, we have done our best to ensure that the basic necessities are kept within our means, promoted the design of spending policies and mechanisms in related areas, and raised the level of ensuring and improving people's wellbeing. Statistics show that from 2016 to 2019, key expenditures related to people's livelihood, including education, social security and employment, urban and rural communities, medical and health care and family planning, housing security, energy conservation and environmental protection, culture, sports and media, increased from 9.6 trillion yuan to 12.4 trillion yuan, accounting for 51.1 percent of total expenditures to 52.1 percent.


Source: Ministry of Finance, PRC